ACC 212 Exam 1 Chapter 4
For which situation(s) below would an organization be more likely to use a process costing system of rather than a job-order costing system? A. a paper mill that processes wood pulp into large rolls of paper B. a shop that restores old cars to "showroom" quality C. a framing shop that builds picture frames to order for individual customers D. a masonry company that builds brick walls, bulkheads, and walkways designed by architects
A
The best cost system to use for custom-made, one-of-a-kind products is: A) job order costing B) universal cost tracking C) custom costing D) process costing
A
Under what circumstances can reducing the incurrence of the overhead allocation base or cost driver result in an actual reduction in overhead cost? A) when the allocation base or cost driver is an activity that causes the cost B) when a single allocation base is used C) when several allocation bases are used D) None of these answers is correct.
A
When a company uses ABC, reducing the incurrence of the cost driver: A) will reduce the overhead allocated to the product and probably will reduce the amount the company actually pays for overhead B) has no impact on the allocated overhead cost for a product C) will reduce the overhead allocated to the product but probably will not reduce the amount the company actually pays for overhead D) None of these answers is correct.
A
When costs are allocated to products based on the overhead resources they use, product costs are: A) more accurate B) only minimally related to allocated overhead C) less accurate D) higher
A
Allocating manufacturing overhead cost to production using a single allocation base: A) does a good job of accurately assigning manufacturing overhead costs B) usually does not do a good job of accurately assigning manufacturing overhead costs C) generally results in lower gross profit on each product D) is more complex than when ABC is used to assign manufacturing overhead costs
B
Using ABC can help a firm: A) decrease the wholesale prices of its products B) reduce costs C) increase the retail prices of its products D) reduce its workforce
B
When a cost pool is divided by its corresponding activity, the result is the: A) cost driver B) overhead allocation rate C) cost pool percentage D) None of these answers is correct
B
When comparing traditional overhead allocation to ABC: A) in the long run, ABC and traditional overhead allocation are about the same with respect to their complexity and expense B) ABC is more complex and more expensive to use C) ABC is less complex and less expensive to use D) None of these answers is correct.
B
When managers begin to implement ABC, they may find unnecessary costs. This is an example of: A) controlling the allocation base B) closer cost scrutiny C) smaller cost pools D) All of these answers are correct.
B
When overhead costs are allocated using activity-based costing, the overhead allocated to the products: A) includes all of the direct cost of manufacturing the products. B) represents the cost of manufacturing overhead resources used to make the products C) assures that product costs will be lower D) assures that product costs will be higher
B
ABC will probably not result in more accurate product costs when: A) multiple allocation bases are used B) diversity exists in products or in manufacturing processes C) a single product is manufactured or when manufacturing processes are similar D) multiple cost drivers are used
C
Barraza Corporation uses a weighted-average process costing system. Barraza has two direct materials. One of these materials is added at the beginning of the production process. The other material is added when processing is 50% complete. When will the equivalent units of production for these two materials be equal? A. when processing on beginning work in process is less than 50% complete at the start of the period. B. when processing on beginning work in process is more than 50% complete at the start of the period. C. when processing on ending work in process is over 50% complete. D. when processing on ending work in process is less than 50% complete.
C
Costs in an operation costing system are accumulated by: A. department. B. by individual job. C. by both job and departments. D. by neither job nor department.
C
Cullman & Smith Parts, Inc., has a designated cost pool for the costs associated with the acquisition and handling of the raw materials. Under ABC, a likely allocation base to allocate such costs would be: A) machine hours B) direct labor hours C) numbers of parts D) direct labor dollars
C
Implementing an ABC cost pool may reveal: A) manufactured products that are obsolete B) a predetermined overhead application rate is in use C) unnecessary costs that were hidden using larger traditional allocation cost pools D) None of these answers is correct
C
Managers who desire to reduce the overhead cost allocated to their products using a predetermined overhead application rate: A) treat fluctuations in actual overhead costs as operating expenses for the period B) change the rate in response to fluctuations in actual overhead during the year C) must reduce the occurrences of the allocation base D) None of these answers is correct
C
Manufacturing overhead allocated using ABC will cause the gross profit for a product to be: A) greater than when a traditional overhead allocation method is used B) less than when a traditional overhead allocation method is used C) more accurate and reliable than under a traditional overhead allocation method D) There is no relationship between gross profit and ABC.
C
Pulo Corporation uses a weighted-average process costing system. The company has two processing departments. Production starts in the Assembly Department and is completed in the Finishing Department. The units completed and transferred out of the Assembly department during April will become the: A. units in April's ending work in process in Finishing. B. units in May's beginning work in process in Finishing. C. units started in production in Finishing for April. D. units started in production in Finishing for May.
C
The denominator of the calculation used to find the overhead allocation rate based on the pairing of cost pools and cost drivers is the: A) estimated product cost B) number of units produced C) cost driver D) estimated overhead cost
C
The recommended number of cost pools to use when employing ABC is: A) no more than six B) at least three C) as many as is practical to accurately allocate manufacturing overhead D) Cost pools are not used in ABC.
C
Under ABC, the next step after cost pools have been identified is to: A) calculate a predetermined overhead allocation rate B) calculate the cost of individual products C) select cost drivers D) reduce overhead costs
C
Using ABC, manufacturing cost control is achieved by controlling: A) inventory levels B) operating expenses C) the cost driver D) All of these answers are correct
C
When a company uses traditional overhead allocation instead of ABC, reducing the incurrence of the allocation base: A) will reduce the overhead allocated to the product and probably will reduce the amount the company actually pays for overhead B) has no impact on the allocated overhead cost for a product C) will reduce the overhead allocated to the product but probably will not reduce the amount the company actually pays for overhead D) None of these answers is correct.
C
When activity-based costing is used, the cost of manufacturing activities: A) are accumulated into one cost pool B) are not taken into account for cost accounting purposes C) are each accumulated in its own dedicated cost pool D) becomes a period expense on the company's income statement
C
When comparing traditional overhead allocation to ABC, the number of cost pools are: A) less under the ABC overhead method B) zero because cost pools are not used under the ABC method C) greater under the ABC overhead method D) the same under the ABC and traditional overhead methods
C
When the weighted-average method of process costing is used, a department's equivalent units are computed by: A. subtracting the equivalent units in beginning inventory from the equivalent units in ending inventory. B. subtracting the equivalent units in beginning inventory from the equivalent units for work performed during the period. C. adding the units transferred out to the equivalent units in ending inventory. D. subtracting the equivalent units in beginning inventory from the sum of the units transferred out and the equivalent units in ending inventory.
C
Which of the following companies would be most likely to use a process costing system? A. Ship builder. B. Movie studio. C. Oil refinery. D. Hospital.
C
Which statement below regarding a traditional allocation base is false? A) Managers cannot reduce allocated overhead by directly reducing actual overhead. B) Actual overhead costs may change but predetermined rates will not fluctuate. C) Managers can reduce allocated overhead by directly reducing actual overhead. D) Predetermined overhead application rates are established in advance of their use.
C
With respect to cost control, when comparing traditional overhead allocation to ABC: A) ABC does not aid in cost reduction but traditional overhead allocation can B) cost reduction is not a factor in the allocation of manufacturing overhead C) ABC can aid in cost reduction but traditional overhead allocation usually does not D) both ABC and traditional overhead allocation can aid in cost reduction
C
ABC generally will result in more accurate product costs when: A) a single product is manufactured or when manufacturing processes are similar B) a single cost driver is used C) the company manufactures complex products D) diversity exists in products or in manufacturing processes
D
Manufacturing diversity can take many forms. Which item below would not be an example of manufacturing diversity? A) Some products require more factory resources than other products B) A company manufactures some simple and some complex products C) Some products require more parts than other products D) All of these answers are correct
D
Manufacturing overhead allocated using ABC will: A) always be higher than if a traditional allocation method is used B) generally be the same as when a traditional allocation method is used C) always be lower than if a traditional allocation method is used D) be more accurate and representative of resources consumed than a traditional allocation method
D
Material purchasing and handling cost has been identified as an overhead cost pool. A reasonable cost driver for such a cost pool would be the number of: A) production runs B) machine hours C) components tested D) parts
D
Quality testing has been identified as an overhead cost pool. A reasonable cost driver for such a cost pool would be the number of: A) machine hours B) parts C) production runs D) components tested
D
When ABC is used, an allocation base that would likely be used for costs associated with production quality would be the number of: A) direct labor dollars B) direct labor hours C) machine hours D) components tested
D
When activity-based costing is used, the cost of manufacturing activities: A) are accumulated into one cost pool B) are not taken into account for cost accounting purposes C) becomes a period expense on the company's income statement D) are each accumulated in its own dedicated cost pool
D
When manufacturing diversity exists: A) using ABC will almost always result in less accurate product costs B) the wholesale prices of a company's products will be lower C) the retail prices of a company's products will be higher D) using ABC will usually result in more accurate product costs
D
Which of the following companies would be most likely to use a process costing system? A. a shipbuilder B. a furniture manufacturer C. a law firm D. a utility producing natural gas
D
Which of the following statements about a process costing system is incorrect? A. In a process costing system, each processing department has a work in process account. B. In a process costing system, equivalent units are separately computed for materials and for conversion costs. C. In a process costing system, overhead can be underapplied or overapplied just as in job-order costing. D. In a process costing system, materials costs are traced to units of products
D
Which statement below is not a way in which ABC can help a firm reduce costs? A) Costs are more closely scrutinized using ABC. B) Managers will reduce allocation bases, which for ABC, are cost causes. C) Smaller ABC cost pools makes it more difficult to shield questionable costs. D) All of these answers are correct.
D
5. Under the weighted-average method, the equivalent units used to compute the unit costs of ending inventories relate only to work done during the current period. True False?
FALSE
3. The units in beginning work in process inventory plus the units in ending work in process inventory must equal the units transferred out of the department plus the units started into production. True False?
False
4. In order to equitably allocate costs in a process costing system, dissimilar products are restated in terms of equivalent units by weighting the number of units produced by their market values. True False?
False
Costs are accumulated by department in a process costing system. True False?
True
When materials are purchased in a process costing system, a materials account is debited with the cost of the materials. True False?
True
11. The "costs accounted for" portion of the cost reconciliation report includes the cost of beginning work in process inventory and the costs added to production during the period. True False?
false
13. Process costing is used in those situations where many different products or services are produced each period to customer specifications. True False?
false
6. In calculating cost per equivalent unit under the weighted-average method, prior period costs are not combined with current period costs. True False?
false
The "costs accounted for" portion of the cost reconciliation report includes the cost of beginning work in process inventory and the cost of units transferred out. True False?
false
The "costs to be accounted for" portion of the cost reconciliation report includes the cost of ending work in process inventory and the costs added during the period. True False?
false
12. The "costs to be accounted for" portion of the cost reconciliation report includes the cost of beginning work in process inventory and the costs added during the period. True False?
true
14. A job-order cost system would be used to account for the cost of building an oil tanker. True False?
true
15. Operation costing is a hybrid system that employs certain aspects of both job-order and process costing. True False?
true
16. Both job-order and process costing systems use averaging to compute unit product costs. True False?
true
8. Using process costing, it is necessary to consider the stage of completion of the units when assigning conversion cost to partially completed units in the ending work in process inventory. True False?
true
Under the weighted-average method of process costing, costs from the prior period are averaged with those of the current period in computing unit costs. True False?
true